Bangladesh losing billions in tobacco revenue despite raising cigarette taxes in budget

 
It has been almost one and a half months since the government raised cigarette prices in the national budget, but it is not raking in extra revenue because of a clever strategy taken by the tobacco companies.

They escalate their production before the budget and go on a sales spree. It is the time they pay the government all taxes, bdnews24 reports.

But after the prices are raised, the same cigarettes are sold at higher prices, leading the government to miss out on the extra revenue for a few months.
A statistical analysis of this sector shows that the government could have earned Tk 2 billion more in one month alone.

An official at the National Board of Revenue, or NBR, said they were working to deal with the strategy of the companies.

 The official also said the Directorate of National Consumer Rights Protection, or DNCRP, was supposed to work on the issue.
The DNCRP admitted its 'responsibility' and said it could not carry out raids on cigarette companies because it was occupied with controlling the prices of essential goods.

The tobacco companies did not make comments.

HOW GOVERNMENT LOSES REVENUE

As per the law, cigarettes are a price-sensitive product. Since this type of goods sees an escalation in production and stock-up whenever the price rises, a new rate is always implemented immediately after a hike is proposed in the budget.

This means the tax and price increase of cigarettes was effective immediately after the finance minister proposed the 2024-25 budget on Jun 6. The tax was increased on all four qualities of cigarettes.

The retail price of 10 sticks of low-quality cigarettes rose to Tk 50 from Tk 45, and the subsidiary tax was increased from 58 percent to 60 percent in the budget. This pushed up the tax to 76 percent from 74 percent. The 15 percent VAT and 1 percent health surcharge remained the same as before.

For the mid-quality cigarettes, the price of 10 sticks rose to Tk 70 from Tk 67, for high-quality ones from Tk 113 to 120 and for the premium quality, the price of 10 sticks increased from Tk 150 to Tk 160. For the top three qualities, the subsidiary tax was increased from Tk 65 to Tk 66. The 15 percent VAT and 1 percent health surcharge remained the same as before.

As per the rules, the cigarette companies should put a price tag on cigarette packets higher than the price fixed by the government.
The tax will be applied to the price mentioned on the packet. But this is not happening.

In different parts of the capital, the retail price of a 20-stick packet of premium quality cigarettes Benson & Hedges and Marlboro packets remained printed at Tk 310 like it was before the budget announcement.

But retail sellers are charging Tk 324-325 for a packet.
According to the law, the retail price should be printed Tk 324 or 325 after the budget was passed. Since it was not printed, the consumers were paying extra but the government missed the extra revenue.

Earlier, the government used to get Tk 251.10 in revenue as per 81 percent tax. At the current price, the government should have Tk 265.68 in revenue but it is getting the same amount as before since the new retail price is not printed on the packet.
The retail price for a 20-stick packet of low-quality cigarettes like Derby, Hollywood and Meriss is still printed at Tk 90. The government got Tk 65.12 in revenue at a 74 percent rate.

The same packet, however, is being sold at Tk 120 after the budget.
The government should have received Tk 76 in revenue but the extra money is going to the seller, dealer or the company.
The new price fix by the government and new tax added to the previous price shows that tax for the high-quality cigarette should rise a minimum of 7.5 percent and for the mid-quality 4.5 percent.